Correlation Between Vanguard and Brent Crude
Can any of the company-specific risk be diversified away by investing in both Vanguard and Brent Crude at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Vanguard and Brent Crude into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard SP Small Cap and Brent Crude Oil, you can compare the effects of market volatilities on Vanguard and Brent Crude and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Vanguard with a short position of Brent Crude. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and Brent Crude.
Diversification Opportunities for Vanguard and Brent Crude
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vanguard and Brent is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP Small Cap and Brent Crude Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brent Crude Oil and Vanguard is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Vanguard SP Small Cap are associated (or correlated) with Brent Crude. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brent Crude Oil has no effect on the direction of Vanguard i.e., Vanguard and Brent Crude go up and down completely randomly.
Pair Corralation between Vanguard and Brent Crude
Given the investment horizon of 90 days Vanguard SP Small Cap is expected to generate 0.63 times more return on investment than Brent Crude. However, Vanguard SP Small Cap is 1.58 times less risky than Brent Crude. It trades about 0.18 of its potential returns per unit of risk. Brent Crude Oil is currently generating about 0.05 per unit of risk. If you would invest 9,333 in Vanguard SP Small Cap on November 1, 2024 and sell it today you would earn a total of 318.00 from holding Vanguard SP Small Cap or generate 3.41% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 95.24% |
Values | Daily Returns |
Vanguard SP Small Cap vs. Brent Crude Oil
Performance |
Timeline |
Vanguard SP Small |
Brent Crude Oil |
Vanguard and Brent Crude Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vanguard and Brent Crude
The main advantage of trading using opposite Vanguard and Brent Crude positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard position performs unexpectedly, Brent Crude can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Brent Crude will offset losses from the drop in Brent Crude's long position.Vanguard vs. Vanguard SP Small Cap | Vanguard vs. Vanguard SP Small Cap | Vanguard vs. Vanguard SP Mid Cap | Vanguard vs. Vanguard Russell 2000 |
Brent Crude vs. Orange Juice | Brent Crude vs. Micro E mini Russell | Brent Crude vs. Silver Futures | Brent Crude vs. Micro Gold Futures |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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